Sticking With This Costco Price Target, But Inflation Pressure Could Force Us to Revisit

Supermarkets Compete In Premium Beef Market

Fleshing out the initial Costco (COST) comments we shared with you earlier on Friday morning, we are reiterating our $1,100 price target for the shares.

Given the fallout so far for the U.S.-Iran conflict, the impact on gas prices and prospects for it to stoke a fresh round of inflation pressures, we continue to see Costco as being well positioned to pick up further consumer wallet share. While we could nudge our price target a few dollars higher, like some across Wall Street are, we’ll continue to closely track upcoming monthly adjusted comp sales, and if we see those figures for the U.S. accelerate, that would give us good reason to lift our COST price target in a more meaningful way.

For now, we’ll maintain our One rating, but if we see COST shares chug higher past the $1,025 level, barring any adjustments to our existing target, we may need to revisit that rating.

Costco’s February Quarter

For its February quarter, Costco reported EPS of $4.58 per share, $0.03 better than the market consensus, on revenue that climbed 9.2% year over year to $69.6 billion. Of that $69.6 billion, $68.2 billion were associated with warehouse and digital sales. Adjusted comparable sales, which exclude impacts from changes in gasoline prices and foreign exchange, rose 6.7% with the U.S. up 6.4%.

No major surprises, given the company’s monthly sales reports, but it bears repeating that 6.4% figure was well ahead of competitors and stand on the back of the strong showing in the February 2025 quarter. Fueling those comp sales figures were favorable traffic and transaction sizes, and we see more of that ahead as consumers contend with a fresh round of inflation pressures.

Turning to the other $1.35 billion in revenue for the quarter, it came from the high margin membership fee revenue stream.

Costco exited the February quarter with 40.4 million paid executive memberships (up 9.5% year over year) and 82.1 million total paid members (up 4.8%). Renewal rates remain strong with more than 92% in the U.S. and Canada, while worldwide renewal rates remain steady at 89.7%. During the quarter, Costco expanded its warehouse footprint to 924 warehouses.

That combination led to a more than 13% year-over-year increase in membership fee revenue for the quarter, which accounted for about 50% of Costco’s pre-tax income. During the earnings call, management shared that it targets not only 28 additional net warehouse locations in the current fiscal year, but 30-plus new openings per year in the coming ones. That points to a continued step up in not only membership fee revenue but also Costco’s bottom line.

Also, during the earnings call, questions were asked about a potential special dividend, something Costco has paid in the past to goose returns for shareholders.

While management didn’t take it off the table, it spoke about its warehouse expansion plans and conceded that it wants to continue to grow the regular quarterly dividend. While that might be what some investors want to hear, we see the footprint expansion leading to higher revenue and earnings, a combination that should increase the company’s regular dividend and could still lead to a special dividend down the line.

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At the time of publication, TheStreet Pro Portfolio was long COST.